GLOBAL ECONOMIC PROSPECTS I J A N U A R Y
CHAPTER 1
2021
to have rebounded last year at a faster-thanexpected clip, with particular support from infrastructure spending. China's strength was an exception, however, and disruptions from the pandemic in the majority of other EMDEs were more severe than previously envisioned, resulting in deeper recessions and slower recoveries, especially in countries with recent large COVID19 outbreaks (figure 1.1.E). Prospects for the global economy are uncertain, and several growth outcomes are possible. In the baseline forecast, global GDP is expected to expand 4 percent in 2021, predicated on proper pandemic management and effective vaccination limiting the community spread of COVID-19 in many countries, as well as continued monetary policy accommodation accompanied by diminishing fiscal support. Nonetheless, the level of global GDP in 2021 is forecast to be 5.3 percent below pre-pandemic projections—or about $4.7 trillion. After this year's pickup, global growth is envisioned to moderate in 2022 to 3.8 percent—still above its potential pace, but weighed down by lasting damage from COVID19. By 2022, global GDP is still expected to be 4.4 percent below pre-pandemic projections— with the gap in EMDEs nearly twice as large as in advanced economies—as output remains dampened by lingering risk aversion on the demand side and the effects of diminished physical and human capital accumulation on labor productivity (figure l.l.F). Advanced economies are projected to recover, with growth reaching 3.3 percent and 3.5 percent in 2021 and 2022, respectively, on the back of pandemic containment aided by widespread vaccination and sustained monetary policy accommodation, which is expected to more than offset the partial unwinding of fiscal support. Although aggregate EMDE growth is envisioned to firm to 5 percent in 2021 and to moderate to 4.2 percent in 2022, the improvement largely reflects China's expected rebound. Absent China, the recovery across EMDEs is anticipated to be far more muted, averaging 3.5 percent in 2021-22, as the pandemic's lingering effects continue to weigh on consumption and investment (chapter 2). Despite the recovery, aggregate EMDE output in
FIGURE 1.1 Global prospects COVID-19 has continued to spread, with sharp resurgences in some areas. Global economic activity, which started to rebound in mid-2020, has moderated. The fall in global investment last year was sharp, particularly for emerging market and developing economies (EMDEs) excluding China. The 2020 global recession was somewhat less pronounced than previously expected due to shallower contractions in advanced economies and a more robust recovery in China, whereas most other EMDEs experienced deeper recessions. Global activity is forecast to remain well below prepandemic projections as the recovery is hampered by the pandemic's lingering effects. A. Evolution of the pandemic
B. Global activity indicators
New weekly cases, thousands 400 —Advanced economies -EMDEs
Index, Index, 100=January 3100=December 2019 February 6, 2020 —Retail sales 120 —Industrial production 120 -GDP —Mobility (RHS) 100 ^—V -^^^^tf— 100
300
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C. Investment levels over 2020-22 Index, 100=2019
D. Global growth Percent
110
• 2020 • 2021 «2022
105 100
95
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90 85
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•World —Advanced economies -EMDEs
Advanced EMDEs economies
1' EMDEs excl. China
E. Contributions to global growth forecast revisions
2010 2012 2014 2016 2018 2020 2022
F. Gaps with pre-pandemic projections by 2022
Percentage points
1.5
China EMDEs excl. China Advanced economies
AEs
World
LICs
EMDEs
PCS
Sources: Google COVID-19 Community Mobility Reports (database); Haver Analytics; Our World in Data (database); World Bank. Note: AEs = advanced economies; EMDEs = emerging market and developing economies; PCS = fragile and conflict-affected situations; LICs = low-income countries. A. Figure shows seven-day moving average of the daily new COVID-19 cases. Last observation is December 15, 2020. Sample consists of 36 advanced economies and 147 EMDEs. B. Data are daily for mobility, monthly for industrial production and retail sales, and quarterly for GDP. Mobility is the simple average of movement trends as reported in the Google COVID-19 Community Mobility Report. Daily movement trends are calculated as deviations from the baseline, which is the median value during the five-week period January 3 - February 6, 2020. Last observation is 2020Q3 for GDP, September 2020 for retail sales, and October 2020 for the other indicators. C. Investment refers to gross fixed capital formation. Aggregate growth is calculated with real investment at 2010 prices and market exchange rates as weights. Sample includes 141 countries, consisting of 36 advanced economies and 105 EMDEs. D. Shaded area indicates forecasts. Data for 2020 are estimates. Aggregate growth rates calculated using GDP weights at 2010 prices and market exchange rates. E. Figure shows the contribution to forecast revisions relative to the June 2020 edition of the Global Economic Prospects report. F. Figure shows the gaps between the current projections and the forecasts released in the January 2020 edition of the Global Economic Prospects report.